Parsley Energy, Inc. (ticker: PE) announced on May 23, 2016, that the company has reached an agreement to acquire mineral rights under approximately 30,000 acres consisting of Parsley leasehold and other adjacent properties in Pecos and Reeves Counties, Texas, in the Southern Delaware Basin for $280.5 million in cash. The proposed transaction is scheduled to close by July 14, 2016.
Parsley also announced the purchase of additional working interests in its leasehold in Pecos and Reeves Counties totaling 885 net acres for $9.0 million in cash. This transaction closed on May 10, 2016.
Acquisition Highlights
Mineral Rights Acquisition
- Acquired mineral rights in 29,813 acres (hereafter “mineral acreage”) with an average royalty interest of 17.5%.
- Mineral rights boost net revenue interest (“NRI”) on approximately 186 gross/net horizontal drilling locations in the upper Wolfcamp interval, assuming one flow unit and 660′ between-well spacing. The company is assessing the potential for additional flow units in the Wolfcamp complex and the Bone Spring interval on acreage associated with acquired mineral rights.
- The average NRI on horizontal drilling locations associated with acquired mineral rights increases from 75% to 92.5%.
- Estimated net current production associated with acquired mineral rights is approximately 280 barrels of oil equivalent per day.
- 82% of mineral acreage represents Parsley leasehold, with the balance leased and operated by other operators.
- Parsley also acquired surface rights on approximately 80% of mineral acreage, eliminating compensation for surface damages and water procurement, among other costs, and also facilitating optimal well and facility placement.
- Consistent with the company’s previously announced capital plan, Parsley expects to complete 5-7 wells in the Southern Delaware Basin this year. Of these, the Company expects 3-5 to be completed on the acquired mineral acreage.
Working Interest Acquisition
- Through a separate transaction that closed on May 10, 2016, Parsley acquired additional working interests in its Southern Delaware leasehold in Pecos and Reeves Counties.
- All of the incremental working interests are associated with mineral acreage, bringing Parsley’s working interest to 100% and NRI to 87.5% in the affected properties.
- Assuming just one flow unit in the upper Wolfcamp target interval, the acquired working interests translate to an additional 10 net horizontal drilling locations with an average lateral length of 7,250′.
Financing
Parsley Energy paid a total of $289.5 million between the two acquisitions, which will be financed through senior unsecured notes and an equity offering. Concurrently with today’s acquisition announcement, Parsley announced the company intends to issue eight million shares of common equity (and an additional 1.2 million shares in underwriter allotment). Parsley has yet to announce pricing for the offering, but expectations from EnerCom Analytics are the proceeds will be in the neighborhood of $220 million.
The company also announced plans to offer $200 million in senior unsecured notes due 2024. Specifics on rates have yet to be announced.
Parsley said it intends to use the proceeds from these offerings, expected to be around $420 million to pay for the acquisition, capital expenditures, future acquisitions, and general corporate purposes.
